Offsettng Tax Against Interest/Other Costs

[T5R+]

Need some help/advice from the "learned ones".

SITUATION:
If I move house and buy the new one outright. Funding new house by taking out a mortgage on my original home.

TAXATION
Can I argue that (rental income - "original house costs" ) is my net income and thus I should only be taxed on the "net income" and not gross rental income.

ORIGINAL HOUSE COSTS

1. interest
2. mortgage arrangement fee
3. rental agent fees
4. any repairs
5. insurance
6. gas certificates etc
7. gardening
8. landlord certificates
9. etc

This may be very simplistic but is the rationale sensible?

[Eric Mc]

You are not clear in what you are saying about whether you remain owning only one house or not.

Are you saying:

I am buying a new house which will be my new residence

I am not selling my current house but will retain it as a Rented Out Property

If that is the case, if you borrow to buy your new residential property, you cannot claim that the interest being incurred in respect of that particular loan is in respect of your rented property.
However, if the borrowing is a combined loan in that some of it relates to your residence and some of it relates to what is now a rented out property, the interest on that portion that relates to the rented property CAN be offset against the rents received from that property. How you arrive at the correct split may be a bit tricky but the Revenue would expect it to be proprtional to the borrowings related to each property.
Don't forget that other expenses will be allowed against the rented property income as well, such as regular maintenance costs, repairs, rates and water charges (if paid by the landlord rather than the tenant), management fees to letting agents etc.

In your list you include the mortgage arrangemnt fee. This would be totally disallowable if the loan is entirely for the new home.
If the mortgage covers both properties, the mortgage arrangement fee is STILL not allowable against rental income as it is deemed to be a capital cost. It could only be added to the original cost of the first house if and when a Capital Gains Tax computation was being prepared.

Edited by Eric Mc on Friday 14th December 20:50

[T5R+]

Thanks Eric Mc - sorry not clear in original post....essentially, both mine/ours.

Residential bought outright - funded by taking out a mortgage solely on the Rented Out Property.
Residential house will be my main residence. (New job = new town = new house)

Rented Out Property is the only one with a mortgage.

Rented Out Property either vacant or rented to tenants (had previously lived here as my home for last 10 years).

My problem is that the Rented Out Property is owned outright in sole name and thus rental income will be taxed (higher rate). My plan is to borrow on it, put into joint names (other half has no income thus thinking of tax efficiency - if could put it solely in her name would be ideal, but may be illegal as no income and hence mortgage would have to be in joint names).

Edited by T5R+ on Friday 14th December 21:18

Edited by T5R+ on Friday 14th December 21:32